econ quiz 1
kentucky79
Tucker.Ch03_LECTURE_SLIDES_EFT_9e.ppt*
Chapter 3
Market Demand and Supply
Lecture Slides
Economics for Today
Irvin B. Tucker
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Why is this chapter important?
- It introduces basic supply and demand analysis
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What is demand?
- Demand represents the choice making behavior of buyers
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What does “ceteris paribus” mean?
- All else remains the same
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What is the
law of demand?
- There is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What is a
demand curve?
- A curve that shows the quantities of a good or service that people are willing and able to buy at different prices
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 1 An Individual Demand Curve for Blu-rays
Price per Blu-ray
Point
Quantity Demanded (per year)
A $20 4
B 15 6
C 10
D 5 16
10
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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20
15
10
5
0 4
8
12
16
A
B
C
D
Exhibit 1 Individual’s Demand Curve for Blu-rays
Quantity of Blu-rays (per year)
Price per Blu-ray (dollars)
Demand Curve
20
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Why do demand curves have a negative slope?
- As the price per unit of a good or service falls, buyers can afford to buy more units per period of time.
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What is
market demand?
- The summation of the individual demand schedules in a market
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 2 The Market Demand Curve for Blu-rays
Price
$20
5
Price
Price
$20
$20
5
5
D1
D2
0
0
DTOTAL
0
Fred’s Demand Curve
Mary’s Demand Curve
Market Demand Curve
+
=
2
1
3
5
12
7
Quantity ( per year)
Quantity (per year)
Quantity (per year)
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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KNOW THE DIFFERENCE BETWEEN A “CHANGE IN THE QUANTITY DEMANDED” AND A “CHANGE IN DEMAND”
Important !
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
When price changes, what happens?
- The curve does not shift and there is a “change in the quantity demanded”
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Price decreases
Downward movement along the demand curve
Increase in quantity demanded
Price Increases
Upward movement along the demand curve
Decrease in quantity demanded
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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20
15
10
5
10
20
30
40
A
B
Exhibit 3(a) A change in price causes a change in the quantity demanded
D
50
Quantity of Blu-rays (millions per year)
Price per Blu-ray (dollars)
0
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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When a variable other than price changes, what happens?
- The whole demand curve shifts, stated as “there is a change in demand”
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Change in a nonprice determinant
Decrease or increase in demand
Leftward or rightward shift in the demand curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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20
15
10
5
10
20
30
40
D1
D2
50
Exhibit 3(b) When the ceteris paribus assumption is relaxed, the whole curve can shift
B
A
Quantity of Blu-rays (millions per year)
Price per Blu-ray (dollars)
0
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What is the conclusion?
- Changes in nonprice determinants can produce only a shift in a demand curve and not a movement along the demand curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 4 Terminology for changes in price and nonprice determinants of demand
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 4 Two types of Demand Changes Illustrated
D3
DECREASE IN DEMAND
Price per unit
D1
D2
INCREASE IN DEMAND
Change in Price Causes
Movement Along Demand Curve
Change in Nonprice Determinant Causes
Change in Nonprice Determinant Causes
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Quantity of good or service per unit of time
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A shift in a demand curve is caused by a change in:
- Number of buyers in the market
- Tastes and preferences
- Income
- Expectations of buyers
- Prices of related goods
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Number of buyers
Immigration from Mexico increases the demand for Mexican food products in grocery stores.
P
Q
D1
D2
D1
D2
P
Q
A decline in the birthrate reduces the demand for baby clothes.
1.
Direct
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
Shift in the Demand Curve
Examples
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Tastes and preferences
For no apparent reason, consumers want Beanie Babies and demand increases.
P
Q
D1
D2
D1
D2
P
Q
After a while, the fad dies and demand declines.
2.
Direct
Shift in the Demand Curve
Examples
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Income a. Normal goods
Consumers’ incomes increase, and the demand for steaks increases.
P
Q
D1
D2
D1
D2
P
Q
A decline in income decreases the demand for air travel.
3.
Direct
Examples
Shift in the Demand Curve
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Inferior goods
Consumers’ incomes increase, and the demand for hamburger decreases.
P
Q
D2
D1
D2
D1
P
Q
A decline in income increases the demand for bus service.
b.
Inverse
Examples
Shift in the Demand Curve
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Expectations of buyers
Consumers’ expect that gasoline will be in short supply next month and prices will rise sharply. Consequently, consumers fill the tanks in their cars this month, and there is an increase in demand for gasoline.
P
Q
D1
D2
D1
D2
P
Q
Months later consumers expect the price of gasoline to fall soon, and the demand for gasoline decreases.
4.
Direct
Examples
Shift in the Demand Curve
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Prices of related goods
A reduction in the price of tea decreases the demand for coffee.
P
Q
D2
D2
D1
P
Q
An increase in the price of airfares causes higher demand for bus transportation.
5.
Direct
a. Substitute goods
D1
Examples
Shift in the Demand Curve
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 5 Summary of the Impact of Changes in Nonprice Determinants of Demand on the Demand Curve
Complementary goods
A decline in the price of cellular service increases the demand for cell phones.
P
Q
D1
D2
D1
D2
P
Q
A higher price for peanut butter decreases the demand for jelly.
b.
Inverse
Examples
Shift in the Demand Curve
Nonprice Determinant of Demand
Relationship to Changes in Demand Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
What is a normal good?
- Any good for which there is a direct relationship between changes in income and its demand curve
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What does a direct relationship between price and quantity mean?
- The two variables move in the same direction
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What is an
inferior good?
- Any good for which there is an inverse relationship between changes in income and its demand curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What does an inverse relationship between price & quantity mean?
- It means that the two variables move in opposite directions
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What are
substitute goods?
- Goods that “compete” with one another for consumer purchases
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What happens when the price increases for a good that has a substitute?
- The demand curve for the substitute good increases
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What happens when the price decreases for a good that has a substitute?
- The demand curve for the substitute good decreases
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What are
complementary goods?
- Goods that are “jointly consumed” with another good
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What happens when the price increases for a good that has a complement?
- The demand curve for the complementary good decreases
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What happens when the price decreases for a good that has a complement?
- The demand curve for the complementary good increases
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
What is supply?
- Supply represents the choice making behavior of sellers
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
What is the
law of supply?
- There is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 6 An Individual Supply Curve for Blu-rays
Price per Blu-ray
Point
Quantity Supplied (thousands per year)
A $20 50
B 15 45
C 10 35
D 5 20
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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20
15
10
5
10
20
30
40
D
C
Exhibit 6 An Individual Seller’s Supply Curve for Blu-rays
B
A
Price per Blu-rays (dollars)
0
50
Quantity of Blu-rays (thousands per year)
Supply Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Why do supply curves have a positive slope?
- Only at a higher price will it be profitable for sellers to incur the higher opportunity cost associated with supplying a larger quantity
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What is market supply?
- The horizontal summation of all the quantities supplied at various prices that might prevail in the market
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 7 The Market Supply Curve for Blu-rays
Quantity (thousands per year)
Price
$25
15
Price
Price
$25
$25
15
15
S1
S2
0
0
STOTAL
0
Entertain City Supply Curve
High Vibes Supply Curve
Market Supply Curve
+
=
15
25
25
35
40
60
Quantity (thousands per year)
Quantity (thousands per year)
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
KNOW THE DIFFERENCE BETWEEN A “CHANGE IN THE QUANTITY SUPPLIED” AND A “CHANGE IN SUPPLY”
IMPORTANT !
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
When price changes, what happens?
- The curve does not shift and there is a “change in the quantity supplied”
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Increase in
price
Increase in quantity supplied
Decrease in
price
Decrease in quantity supplied
Upward movement along the supply curve
Downward movement along the supply curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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20
15
10
5
10
20
30
40
A
Exhibit 8(a) Supply Curve
A change in price causes a change in the quantity supplied
B
Price per Blu-ray (dollars)
0
S
Quantity of Blu-rays (millions per year)
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
When a variable other than price changes, what happens?
- The whole curve shifts and there is a “change in supply”
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Change in
nonprice
determinant
Decrease or increase in supply
Leftward or rightward shift in the supply curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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20
15
10
5
10
20
30
40
S1
S2
Exhibit 8(b) Increase in Supply
A
B
Price per Blu-ray (dollars)
0
Quantity of Blu-rays (millions per year)
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
What is the conclusion?
- Changes in nonprice determinants can produce only a shift in a supply curve and not a movement along the demand curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 9 Terminology for changes in price and nonprice determinants of supply
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 9 Two types of Supply Changes Illustrated
S3
DECREASE IN SUPPLY
Price per unit
S1
S2
INCREASE IN SUPPLY
Quantity of good or service per unit of time
Change in Price Causes
Movement Along Supply Curve
Change in Nonprice Determinant Causes
Change in Nonprice Determinant Causes
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
A shift in a supply curve is caused by a change in:
- Number of sellers in the market
- Technology
- Resource prices
- Taxes and subsidies
- Expectations of producers
- Prices of other goods and services the firm could produce
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 10 Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
Number of sellers
The United States lowers trade restrictions on foreign textiles, and the supply of textiles in the United States increases.
P
Q
S1
S2
S2
S1
P
Q
A severe drought destroys the orange crop, and the supply of oranges decreases.
1.
Direct
Nonprice Determinant of Supply
Relationship to Changes in Supply Curve
Shift in the Supply Curve
Examples
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 10 Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
Technology
New methods of producing automobiles reduce production costs, and the supply of automobiles increases.
P
Q
S1
S2
S2
S1
P
Q
Technology is destroyed in war, and production costs increase; the result is a decrease in the supply of good X.
2.
Direct
Nonprice Determinant of Supply
Relationship to Changes in Supply Curve
Shift in the Supply Curve
Examples
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 10 Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
Resource prices
A decline in the price of computer chips increases the supply of computers.
P
Q
S1
S2
S2
S1
P
Q
An increase in the cost of farm equipment decreases the supply of soybeans.
3.
Inverse
Nonprice Determinant of Supply
Relationship to Changes in Supply Curve
Shift in the Supply Curve
Examples
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Taxes and subsidies
An increase in the per-pack on cigarettes reduces the supply of cigarettes.
P
Q
S2
S1
S1
S2
P
Q
A government payment to dairy farmers based on the number of gallons produced increases the supply of milk.
4.
Inverse and direct
Exhibit 10 Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
Nonprice Determinant of Supply
Relationship to Changes in Supply Curve
Shift in the Supply Curve
Examples
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
Exhibit 10 Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
Expectations
Oil companies anticipate a substantial rise in future oil prices, and this expectation causes these companies to decrease their current supply of oil.
P
Q
S2
S1
S1
S2
P
Q
Farmers expect the future price of wheat to decline, so they increases the present supply of wheat.
5.
Inverse
Shift in the Supply Curve
Examples
Nonprice Determinant of Supply
Relationship to Changes in Supply Curve
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 10 Summary of the Impact of Changes in Nonprice Determinants of Supply on the Supply Curve
Prices of other goods and services
A rise in brand-name drugs causes drug companies to decrease the supply of generic drugs.
P
Q
S2
S1
S1
S2
P
Q
A decline in the price of tomatoes causes farmers to increase the supply of cucumbers.
6.
Inverse
Nonprice Determinant of Supply
Relationship to Changes in Supply Curve
Shift in the Supply Curve
Examples
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
*
What is a market?
- Any arrangement in which buyers and sellers interact to determine the price and quantity of goods and services exchanged
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Where is the
equilibrium price?
- At the price where the quantity demanded and the quantity supplied are equal
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Exhibit 11 Demand, Supply,
and Equilibrium for Sneakers (pairs per year)
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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90
60
30
20
50
80
D
S
Exhibit 12 The Supply & Demand for Sneakers
120
Price per pair (dollars)
Quantity of Sneakers (thousands of pairs per year)
0
Shortage
E
Surplus
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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What is the price system?
- A mechanism that uses the forces of supply and demand to create an equilibrium through rising and falling prices
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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